The iron ore freight train derailment in Western Australia late last year, a plant outage in Olympic Dam mine in South Australia and a mine fire in at the Spence copper mine in Chile will cost BHP around $US600 million ($A830 million) for the December half of the 2018-19 financial year.
Despite these events, BHP told investors on Tuesday it was still on track to meet its yearly production forecasts across all its major commodities despite the “negative impact” of the series of incidents over the past six months
“Production in the first half was broadly in line with the prior period despite planned maintenance and outages,” BHP CEO Andrew Mackenzie said in a statement with yesterday’s report.
Delivering its December quarter and half year operational review, BHP said production guidance remained unchanged for petroleum, iron ore, metallurgical coal, and energy coal, while its copper production guidance increased due to the decision not to offload its Cerro Colorado mine in Chile.
BHP said second-quarter iron ore production fell 6% (from the first quarter of 2018 and the December quarter of 2017), thanks to the train derailment that disrupted supply for around 10 days.
That saw iron ore output decline to just on 58 million tonnes during the three months to December 31, compared with 72 million tonnes a year ago.
But iron ore production for the half year was up 2% to around 119 million tonnes in the first half despite that fall in second quarter production.
BHP maintained its full-year guidance of 273 million to 283 million tonnes of iron ore from its WA operations as it hopes to make up the shortfall in the six months to June 30.
The derailment happened on November 5 when a fully-laden 268-car iron ore train careered driverless for 50 minutes at an average speed of 110km/h before it was deliberately derailed about 120km south of Port Hedland.
BHP produced 63 MMboe of petroleum, which was down 1% on the prior corresponding period. The company said lower seasonal gas sales at Bass Strait were partially offset by its Pyrenees operation resuming production in the second quarter.
Copper production was also down 1% on the prior corresponding period to 825,000. Second quarter production was up 2% on the first quarter thanks to record throughput at Cerro Colorado and higher volumes at its Spence operation. The latter returned to full capacity following a fire in September.
Unplanned production outages at Olympic Dam and Spence hit copper output.
BHP also reported a 2% increase in metallurgical (coking) production to 21 million tonnes during the first half thanks partly to record production at Queensland’s South Walker Creek in the second quarter.
And energy coal (thermal or steaming) production fell 5% to 13 million tonnes during the first half. This was caused by the impact of mine sequence change at the Cerrejón operation on Columbia.
BHP chief executive officer, Andrew Mackenzie, appeared to be pleased with the company’s performance in the first half.
“In Petroleum, our first appraisal well at Trion in Mexico encountered oil and we added to our exploration options with successful bids for two licences offshore Eastern Canada.
“We completed the sale of our US shale assets and returned US$5.2 billion to shareholders through a share buy-back program, with a further US$5.2 billion to be returned as a special dividend on 30 January 2019.”
While production guidance for 2018-19 remains unchanged for petroleum, iron ore, metallurgical coal and energy coal, total copper production guidance has increased to between 1,645 million and 1,740 million tonnes due to the retention of the Cerro Colorado mine.
In addition to this, although unit costs were ahead of guidance in the first half, BHP is confident that full year unit costs for all major assets will be in line with guidance due to stronger volumes expected in the current second half.
BHP shares eased 1.3% yesterday to $32.77.
